A Little Bit of Wisdom

May 24, 2004—When you attend a trade show or conference, it's sometimes hard to sift through all the information that is presented over the course of several days. So I'm going to offer a digest of some of the more interesting points made at the recent Retail Systems event in Chicago. I'm paraphrasing the speakers’ comments as

clearly and accurately as I can (speakers, if I've misinterpreted you, please send me an e-mail and let me know).

Linda Dillman, CIO of Wal-Mart, said that getting data on what's in the back of a store at any given moment in time will be the single most important data Wal-Mart gets from its RFID implementation, because it will enable the company to reduce out-of-stocks. Studies show that when a shelf of a particular product is empty, the product is often in the back of the store, and that's what Wal-Mart wants to know. The interesting aspect of this comment is that Wal-Mart is in stock more than most retailers, so the business case for deploying RFID in the rest of the retail industry must be awfully attractive.

Dillman was asked why Wal-Mart is implementing RFID now—why not wait until the standards are finalized and UHF technology is more mature? She said that there was a compelling business case even at the prices of tags and readers today, that the technology is good enough, and that Wal-Mart's decision to deploy it now would drive down prices and lead to improvements in the technology. That, in turn, would make the business case more attractive over time.

Neco Can, senior director of development at Abercrombie & Fitch, said store inventory data for apparel retailers—which have a wide variety of colors, sizes and styles—could be as little as 60 percent to 70 percent accurate. Three years ago, when Can was with The Gap, he ran an RFID pilot that got inventory accuracy up to 99.6 percent accurate. Can said that while RFID will not stop shoplifting, "at least you will know what was stolen." He pointed out that retailers would be able to account for stolen goods and replenish accordingly, something that's not possible today.

James Stafford, head of RFID at Marks and Spencer Group, which is currently testing RFID on clothing in one of its stores, also discussed the issue of inventory accuracy. He pointed out that his company sells 49 different sizes of bras and that keeping them all in stock was a challenge. That's why his company is looking at using RFID to track individual clothing items in its stores. But he said that RFID is expensive, so the real issue is whether it would produce enough efficiency to ensure that the retailer does not pass the price of the tags and readers on to its customers.

Stafford also warned against creating a large group of people to lead an internal deployment, because it is easy to suffer "death by committee." This was echoed by Wal-Mart's Dillman who said that only five staff are working on the company's RFID implementation full-time. Several speakers said it's important to choose a small group of people who are passionate about the potential benefits the technology can bring.

Many of the speakers talked about the fact that the performance of UHF systems needs to improve. The failure rate of RFID labels is a problem (some grumble privately the labels don't work as much as 15 percent of the time). Don Mowery, director of e-business and supply chain at Nestle Purina Petcare, said his company would like to replace bar-code scans with RFID; problem is, unlike bar codes, when you fail to scan an RFID tag, you don't always know it, which means you could be worse off than when you used bar codes.

Simon Ellis, supply chain futurist at Unilever, said that it’s important for manufacturers to be able to read all the cases on a pallet before the pallet is shipped to a retail distribution center. That way, the manufacturer knows what was shipped and can get paid for it. But Unilever has many products that are liquid or come in cans, and in its RFID pilots, the company has not been able to read the interior cases stacked on a pallet.

Milan Turk, director of global customer e-business for Procter & Gamble, said Wal-Mart's mandate had "galvanized" the industry to move forward with an RFID system based on open standards. He said that the reliability of the systems was an issue, but "even if you can't read 100 percent of the cases on pallets, you can't sit on your hands and do nothing."

The main focus of the conference was on retail technology in general, but RFID was a big topic of discussion. There was some skepticism about the technology's ability to deliver the promised benefits, and many people expressed concern that it's not ready for wide-scale adoption in the supply chain. But the message from Wal-Mart, Target, Kimberly-Clark, P&G and other thought leaders was: If we don't move forward now, the technology will never be ready.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below.